October 29, 2013

Swiss voters will decide Nov. 24 on introducing a salary cap that
would limit the wage spread in companies to 1:12. The economic lobby is
nervous – success for the proposal in the referendum is not as
unrealistic as once expected.

It wasn’t just the smallholders in the
Swiss multinational pharmaceutical company Novartis who were disgusted
by a 79-million-dollar farewell package to resigning CEO Daniel Vasella
earlier this year. Public outrage was huge.

Two weeks later, Swiss citizens sent a clear message to executives
that their increasingly excessive salaries and bonuses would not be
tolerated: 68 percent of voters supported the “fat cat initiative” which
promised to curb salary excesses and to ban big payouts.

That referendum was more about strengthening shareholder democracy.
Once the initiative is fully implemented, shareholders of Swiss
companies will have a veto right on payments to executives. Within a
one-share-one-vote frame however, concerned shareholders usually get
outvoted by large investors.

“The fat cat initiative includes some good aspects. However, it
neither helps much in limiting big salaries, nor in providing a solution
to unequal income distribution,” argues David Roth, president of the
Swiss Young Socialists Party (Juso).

Juso therefore launched the 1:12-initiative which demands that
executives’ salaries be capped at 12 times that of the lowest-paid
worker in the same company. “No manager should earn more in a month than
his employees get in one year,” Juso demands.

Switzerland’s powerful neoliberal lobby had worked hard to prevent
the success of the fat cat initiative. After its expensive campaign
failed and with the 1:12-initiative already on the horizon, it became
increasingly nervous. Further, a referendum on the introduction of a
national minimum wage is scheduled in 2014.

Once the poorhouse of Europe, Switzerland has transformed into one of
the richest countries on earth. Today, it has one of the highest GDP
per capita in the world and unemployment at just three percent.

In terms of income inequality, Switzerland ranks around Europe’s
average. According to the freshest numbers, 3.5 percent of the employed
in Switzerland are considered working poor, while 11,586 top earners
make more than half a million Swiss francs a year.

According to Daniel Lampart, chief economist of the Swiss Federation
of Trade Unions (SGB), the growing salary excesses over the past 20
years were caused by the fact that executives’ earnings were
increasingly connected to profits and the stock prices of their
companies. “The introduction of bonuses allowed managers to divert big
amounts of money from the aggregate wages into their own pockets.”

In Switzerland, trade unions are comparatively weak and the number of
collective bargaining agreements is low. A national minimum wage
doesn’t exist, the relationship between employees and employers clings
to the concept of social partnership, and strikes are rare. It is mainly
the upper income segment that has been profiting from the increased
individualisation of wage policies.

The campaigns for and against the 1:12-initiative have just reached
the hot phase. In one corner, there’s Juso, the trade unions and the
Social Democratic Party. The opposing side is led by the umbrella
organisation of Swiss small and medium-sized enterprises (SGV), with the
other economy-related organisations as well as the liberal and
right-wing parties on their coat-tails.

If the 1:12-proposal is voted in, only 1,000 to 1,300 mostly big
companies with about half a million employees would be affected
directly. About 4,400 top earners would face a salary cut.

The opponents’ campaign, which is unable to explain why somebody
should earn 30, 50 or 100 times as much as an employee, focuses on
warning the public how everybody would be negatively affected if the
1:12-initiative succeeds.

Hans-Ulrich Bigler, director of the SGV, recently said that losses to
the old-age insurance system and to taxes could amount to nearly 4.4
billion dollars per year. He argued that tax increases would become
inevitable.

A closer look at the concerned study shows that this number is based
on a rather unrealistic worst-case scenario. Juso believes the
initiative would reduce income inequalities, and elevation of the lowest
wages would minimise possible fiscal losses.

Nobody is able to estimate economic and fiscal consequences at this
point, as everything will depend on how affected companies would react
to a new 1:12-rule. Would they elevate the lowest wages? Would they cut
the top wages and use the money for investments? Or would they leave the
country, as for example Ivan Glasenberg, CEO of the commodities giant
GlencoreXstrata, has threatened?

The Swiss government fears first and foremost for the country’s
competitiveness. “There is a real danger that Switzerland-based
companies could leave the country, while foreign companies searching for
a new location could be deterred by the limitations on high wages and
not settle here,” Swiss Economics Minister Johann Schneider-Ammann said
at a press conference.

When in 2009 Juso, led by David Roth, began to collect signatures for
the 1:12 initiative, nobody expected that the proposal could have real
chances for success. “The approval of the fat cat initiative in spring
represented a break with the past. After years of deregulation and
liberalisation people again started to demand rules for the economy,”
Roth says.

Roth is aware of the fact that only one in ten popular initiatives
turn out successfully. Nevertheless, he is confident that on Nov. 24,
David will win against Goliath.

October 15, 2013

A Swiss village has decided to reject tax money from the firm
Glencore and to instead donate it to charities. Other towns may follow,
sending a strong signal to the government to follow the U.S. and the EU
and introduce transparency rules for the extractive industry.It’s rush hour in the city of Zug in
Central Switzerland as Mrs Sandra Räppli struggles to raise her voice
over the traffic noise. About 35 people listen as she lectures about
commodity extraction and trading companies based in the city and the
neighbouring town of Baar.

Räppli talks about complex company structures and tax optimisation,
finally asking the audience: “Could you follow my explanations? Did you
understand?” Then she smiles: “You couldn’t? No problem, because that is
what those companies intend.”

Once a month, actress Maria Greco slips into the role of Sandra
Räppli and guides groups of inhabitants and visitors through the streets
of Zug. The canton counts 116,000 inhabitants and more than 30,000
companies, 105 of which belong to the commodity cluster formed by
GlencoreXstrata, Northstream, Rusal and Gazprom, to name just a few.

Privileged taxation for holding, domicile and mixed companies brought
these firms here. Holding companies are exempt from cantonal income
tax, and pay almost no capital tax. Incomes of management companies
generated abroad are hardly taxed, too.

Critics say Zug’s tax environment is an invitation to ‘transfer
pricing’, a method to allocate a corporation’s net profit before
taxation; in other words a means for tax evasion. Despite sales of
214.44 billion dollars in 2012, Glencore paid no tax on earnings at all
in the canton of Zug last year.

The commodity cluster as a whole is estimated to have paid only 40 million dollars in cantonal and communal taxes.

Under official secrecy rules, exact taxes paid by Glencore and other
companies are not available. Statistics on the number of companies or
their employees is also lacking, even at the national level.

“That lack of transparency is a major problem,” says Andreas
Hürlimann, a parliamentarian with the Green-Alternative party in Zug.
“Even as a member of parliament I can’t be sure that things are handled
correctly if the government on any occasion hides behind the tax
secret.”

Hürlimann finds Zug’s tax regulation deeply unfair. “It makes us
rich, while people in extraction countries suffer, as the companies
evade taxation there.” He says that Zug bears at least some moral
responsibility.

At the end of her tour, Sandra Räppli stops in front of Zug’s town
hall. “Our politicians are hand in glove with Glencore’s managers,” she
tells her audience. “Only if people get active can something be done
about these companies.”

Räppli has just ended her second season of city tours. She’s happy
that the attendance has remained high – by Swiss standards. Media
reports and a campaign run by the Swiss non-governmental organisation Berne Declaration have clearly increased popular interest in the commodity sector.

In the nearby canton of Zurich, these efforts have yielded fruits.
Several villages are up in arms against Glencore. The corporation’s
flotation on the stock market in 2011 had filled the pockets of CEO Ivan
Glasenberg, leading to a huge one-time tax inflow for the canton. That
money was redistributed to the communes.

But in several communes, residents were appalled by profiting
indirectly from what they call “Glencore’s dubious business conduct
abroad.” They collected signatures and demanded that at least 10 percent
of the “Glencore money” be donated to charities who support affected
communities in extraction regions.

In Hedingen, a village of 3,500, voters approved the donation of
120,000 dollars to charities. Samuel Schweizer, a member of the local
citizens’ committee, explained that success to IPS: “Our proximity to
Zug was crucial, people could relate to Glencore. Also, we’ve managed to
build a broad committee.”

Schweizer explained that donating only 10 percent of the “Glencore
money” instead of the whole amount further helped to find a majority.

At least five more communes will soon decide upon similar
initiatives. In Affoltern for example, 180,000 dollars are at stake. In
Hausen, it’s 80,000 dollars.

There, Franz Schüle of the local initiative committee is optimistic.
“We live in a rural area. When I explain that in Colombia the surface of
the land belongs to the farmers, while everything below can be owned by
extraction companies, people can relate to the problem easily.”

“Direct democracy has hit Glencore,” says Oliver Classen,
spokesperson of the Berne Declaration. He’s aware that these communal
initiatives are only a drop in the ocean and a one-time effort.
“However, Hedingen has a huge political signalling effect,” Classen
tells IPS.

This summer, the European parliament introduced the Transparency and
Accounting Directives that force mining, oil and gas companies to
publish their payments to governments; country by country and project by
project. The Swiss government has remained hesitant so far and will
present its own measures next spring.

“We believe that Glencore’s global presence and economic strength
have a predominantly positive impact on the communities in which we
operate. We seek out, undertake and contribute to activities and
programmes designed to improve quality of life for the people in these
communities.

“Glencore’s tax strategy and payments play a vital role in our
intention to achieve long-term sustainable development. We are committed
to full compliance with all statutory obligations, full disclosure to
tax authorities and reporting transparently in the tax payments that we
make to the governments of the countries in which we operate.”

October 10, 2013

Refugee rights organisations are demanding an EU-wide temporary
protection regime for Syrian refugees. The announcement by some
countries that they can take a few thousand refugees is not enough, the
groups say.

Sweden has announced a few steps after
the number of Syrian refugees seeking shelter abroad has crossed the two
million mark in early September.

“The conflict will continue for a long time ahead,” said Fredrik
Beijer, director of legal affairs at the Swedish Migration Board. Sweden
decided to grant permanent residence to about 8,000 Syrians who
currently hold temporary residency permits, and to facilitate family
reunification.

Germany and the Scandinavian country have between them received about
two-thirds of the Syrian refugees fleeing to Europe. Since early 2012,
approximately 14,700 Syrians have asked for asylum in Sweden. In August
alone, 1,201 Syrian asylum-seekers arrived in the country.

On Sep. 11, 107 Syrian refugees were flown out of Lebanon to Hanover
as part of a temporary admission programme announced by the German
government earlier this year. Having committed to 5,000 places, Germany
currently runs the biggest refugee relocation programme for the Syria
crisis.

In June, the UN Refugee Agency (UNHCR) appealed for 10,000
humanitarian admissions. A group of countries including Denmark,
Finland, the Netherlands, Norway and Spain have pledged 960 admissions
for 2013 so far.

“Germany is setting an important example,” UNHCR spokesperson Dan
McNorton told IPS. “We hope more countries will come forward with
similar schemes to help Syrians fleeing the violence.”

Compared to the hundreds of thousands of Syrian refugees stranded in
Turkey, Lebanon, Jordan, Egypt and Iraq, the estimated 40,000 that have
applied for asylum in Europe since April 2011 is peanuts.

A comparison with the Bosnian war between 1992 and 1995 makes today’s
numbers look dismal. At the time, Germany hosted 350,000 Bosnian
refugees, Austria 90,000 and Switzerland nearly 30,000. During the Kosovo war, Germany evacuated more than 15,000 refugees, while Switzerland sheltered 53,000 and Austria 5,000.

The Swiss chapter of Amnesty International calls Switzerland’s
present offer “a drop in the ocean.” Austrian and German refugee rights
organisations have also criticised their governments.

“Germany’s contribution is yet too small,” Karl Kopp, director of
European affairs at the human rights organisation Pro Asyl told IPS,
“though, we appreciate that Germany has launched the debate.”

In addition to the 5,000, several German states have announced they
will permit up to 1,000 Syrian refugees to stay with their Germany-based
relatives. Kopp said that many of these have been trying desperately to
get their relatives to come over.

Bureaucratic hurdles for family reunification are high, as Syrians
already living in Germany have to prove they can provide for their
relatives, host them and pay for their health insurance. “Most of them
are unable to do so. But humanity mustn’t fail due to lack of money,”
Kopp said.

While Switzerland is facilitating family reunification, too, Austria
hesitates to do so. In Austria, upcoming parliamentary elections reduce
the willingness of politicians to invite refugees to the country.

Meanwhile, thousands of Syrian refugees are trying hard to find a way
into Europe. According to the Italian interior ministry, 3,000 Syrians
have already arrived in Italy since the beginning of the year, most of
them in boats. At Europe’s other entry gate, Greek coastguards have
repeatedly been accused of pushing Syrian refugees back into Turkish
waters.

“That is outrageous,” says Kopp. “Europe needs to open legal escape
routes. Currently, Europe asks Syria’s neighbours to open up their
borders, while its own borders remain closed.”

Anny Knapp, president of the Austrian refugee rights organisation
Asylkoordination Österreich says refugees have to turn to the risky and
expensive services of people smugglers, as no legal escape routes exist.

“In addition, the Dublin regulation forecloses that refugees can
profit from family or community ties in other European states,” says
Knapp. According to the Dublin regulation, immigrants may be sent back
to the country through which they first entered the European Union.

Judith Sunderland, senior researcher at Human Rights Watch told IPS
that Syrians seeking asylum in other EU member states face a protection
lottery, with their fate depending on which country they reach first.

“Those who make it to the EU through external border countries such
as Greece, Bulgaria and Cyprus can face problems such as detention,
failure to be granted any form of protection, problems with family
reunification as well as poor or non-existent reception conditions.”

All refugee rights advocates agree that action at the European level is required urgently.

Kopp finds it “absolutely pathetic” that three years after the
beginning of the Syria crisis the EU still doesn’t have an active
admission programme. In June, the European Commission had called upon
its member states to provide resettlement or humanitarian admission
places, to facilitate family reunification and “to admit any Syrians
arriving at the external borders of the Union.”

The European Commission also promised to continue efforts to ensure a
greater degree of convergence between member states’ approaches to the
Syrian refugee crisis. Yet it is far from providing a concerted solution
like a EU-wide temporary protection regime, repeating its failure
during the Libya war in 2011.
Instead, tons of tents and blankets are sent to Syria’s neighbour
states. “Even though they think that the Syrian refugee crisis can be
contained regionally, it has in fact long reached Europe,” says Kopp.
“The catastrophe’s dimensions render such an approach not just absurd,
but highly cynical.”

Water power is the backbone of Alpine countries’ energy supply.
Despite its important role in Europe’s energy shift, further development
of hydroelectric infrastructure in Austria and Switzerland is on hold.

On sunny, windy summer days in Germany,
when millions of solar panels soak up the sun and wind turbines run at
full speed, the German electricity network can’t cope with the
overcapacity. Especially on Sundays, production often exceeds demand.
The result is low prices, at times even negative ones; which means
customers get paid for buying electricity.

Europe’s energy market is liberalised. What happens in Germany
affects all its neighbours. Swiss hydropower stations are unable to
compete under these conditions. The heyday of Swiss water power is over.

The energy source that covers 55 percent of the country’s energy
supply faces drastically reduced profitability, as electricity prices
have sunk 20 percent again compared to the preceding year.

In the light of this market environment, the biggest Swiss energy
producers Alpiq, Axpo, BKW and Repower are less willing to invest in
optimising and enlarging their infrastructure. Repower has announced a
35 percent cut in investments in the next 10 to 15 years.

Andreas Meyer, media person at Alpiq, told IPS that the massive
subsidies for renewable energy have destabilised the market, putting in
question the profitability of hydro and thermal power stations and
blocking further investments. Currently, Alpiq runs a divestment
programme. The company is worried that the price deterioration will
continue.

Further development potential of Swiss water power is disputed. While
the government estimated four to five terrawatt hours, the World
Wildlife Fund assessed only 1.5 terrawatt hours. In any case, the
potential is quite low.

Nevertheless, Switzerland subsidises small hydropower stations with a
capacity of less than 10 megawatt massively, irrespective of their
efficiency and the ecological damage they may cause.

Due to the subventions, small water power projects have become cash
cows. The WWF demands that these subsidies be stopped. “Building new
power stations at previously unspoilt waters is absolutely silly,” water
expert at WWF Switzerland Christoph Bonzi tells IPS. Today, 95 percent
of Swiss water is used for energy production.

For once, conservationists and the leading energy suppliers take a
common stand on the Swiss subsidy model that favours small hydropower
projects. “Isn’t it absurd that subsidising new renewable energy leads
to a situation where even other systemic technologies need to be
subsidised?” says Werner Steinmann, spokesperson for Repower.

The boom of solar and wind energy in Europe has lead to increased
demand for electricity storage, as both energy sources are unsteady.
Germany, Switzerland and Austria agreed last year to increase the
capacities of pumped-storage hydropower plants in a concerted effort.

Several such plants are currently being constructed in the Swiss
Alps. Whether these investments will finally pay off is more uncertain
then ever.

Some Swiss energy companies don’t oppose all state subsidies for
renewable energy. Repower’s biggest shareholder is the Canton of
Grisons. Recently, the canton’s chief councillor Mario Cavigelli broke a
taboo when he demanded subsidies even for electricity produced in big
hydro power plants. Cavigelli asked for cutting money granted to small
hydropower projects.

Within the energy sector, that demand is disputed however. Axpo’s
media person Daniela Biedermann says that it can’t be a solution to
solve the mistakes of the current subsidies regulation with additional
subventions. “We need to discuss how to implement the new renewable
energies into a market-oriented system instead,” she told IPS.

The Swiss Association for Water Management (SWV), which represents
the industry, demands that subsidies for hydropower may no longer be
limited to small projects and that instead the relevant criteria would
have to be efficiency, an aspect that the current subsidy system
completely ignores. The SWV wants promotion for those projects that
produce the most electricity per subsidy-dollar.

Conservationists are less happy about the various further demands
voiced by the water power industry though. In the name of “national
interest”, water power companies have been trying to tap even nationally
protected waters. Instead of using even the last drop of water for
electricity production, the WWF prefers to increase energy efficiency.

Just across the border, the Austrian hydropower industry struggles
with similar problems. Currently, about 60 percent of the country’s
electricity supply is covered by domestic water power. The industry once
intended to increase its capacity by seven terrawatt hours until 2020.

“We surely won’t be able to meet up with our expectations,” says
Ernst Brandstetter, spokesperson of Oesterreichs Energie, which
represents the interests of the Austrian electricity industry. According
to Brandstetter, only an additional four terrawatt hours until 2025 are
realistic. “Unfortunately, many projects are on hold. The industry is
about five years behind its development plans.”

Brandstetter explains that regarding water power stations, the
current market situation is characterised by acute insecurity. “Many
planned projects are economically no longer justifiable.” Oesterreichs
Energie doesn’t demand subsidies. It however wants a more
investor-friendly environment.

“Most worrying is that even storage projects are about to become
unprofitable,” Brandstetter adds. “Along with the electricity networks,
pumped storage hydropower plants are the most important enablers of a
renewable energy future.”

Ernst Brandstetter demands a stop to market distortions by
introducing a European market design with rules granting all energy
sources fair competitive conditions.

For Switzerland’s and Austria’s hydro power industry, much depends on
developments at the European Union. On that level, a consultation on
Environmental and Energy Aid Guidelines 2014-2020 is currently under
way. Whether or not Alpine hydropower may profit from the new guidelines
will be seen next spring.

An accident in a flagship project threatens the future of geothermal
energy in Switzerland. The mishap that was followed by earthquakes has
come as a warning that geothermal deep drilling still has a long way to
go. It occurred in a project in the eastern Swiss city St. Gallen earlier in July brings a new setback, after earlier accidents.

In 2010, 83 percent of St. Gallen’s voters approved a 160 million
Swiss francs (172 million dollars) credit for a flagship geothermal
project. A geothermal power station was expected to cover the
electricity needs of 3,000 to 5,000 households eventually and provide
heat for half of the city’s buildings. In early July, drilling was
concluded up to 4,450 metres depth, and extraction tests prepared.

On Jul. 19 around noon, the engineers’ nightmare happened: they
unexpectedly encountered gas in the drilling hole, which raised the
pressure. The leak was closed and water was pumped into the hole to
reduce the pressure. Next morning, St. Gallen was shaken by an
earthquake that measured 3.6 on the Richter scale, followed by dozens of
micro-earthquakes.

Since then, all eyes are on the city in Switzerland’s east. Engineers
have managed to stabilise the drilling hole. Further test drilling has
been cancelled. Decisions on the project’s future will be taken after
thorough review. Damage to earthquake-affected buildings and
infrastructure was negligible, but the reputation of geothermal energy
has suffered considerably.

Geothermal energy is significant in Switzerland’s energy shift. It
has already found wide use especially for heating buildings. However,
Switzerland wants to use its underground also for electricity
production, expecting it to contribute 4.29 GWh annually by 2050, which
is about 7.5 percent of the country’s electricity consumption. So far,
no geothermal power plant exists on Swiss soil.

Switzerland is not Iceland, where the required heat can be found only
a few hundred metres below the surface. Here, the necessary minimum
temperature of 100 degrees Celsius is found at a depth of 3,000 metres
or more. Drilling such deep holes is a technical challenge, and also
costly.

“An average geothermal power station costs around 80 to 100 million
Swiss francs, around 75 percent of which is for the drilling,” says
Peter Meier, CEO of the Swiss company Geo-Energie Suisse AG. His company
is pushing for pilot projects in order to prove technical feasibility
and economic viability.

But Switzerland’s geothermal efforts have suffered several major
setbacks. A first project “Deep Heat Mining Basel” in the northwestern
city Basel led to a series of earthquakes reaching up to 3.5 on the
Richter scale in 2006, causing damage to buildings and infrastructure.
The project was aborted.

A so-called petrothermal system was used in Basel. This is applied if
no adequate thermal water resources are available. Petrothermal systems
create artificial underground heat exchangers by cracking rock.
Alternatively, hydrothermal systems use natural thermal water
resources in the depth. As such resources first have to be found, costly
test drilling is necessary, and success is not guaranteed.

Following the abortion of the geothermal project in Basel, the city
of Zurich invested 20 million Swiss francs (22 million dollars) into
hydrothermal test drilling in 2009. The drilling did not cause seismic
activity, but proved unsuccessful.

No water in the required amount and temperature was found; the hole
could not be used for the anticipated electricity production, but only
for heating.

Despite those two failures earlier, expectations of geothermal energy had remained high in Switzerland.
After the failure in Basel, experts had claimed that with improved
technology, seismic activity caused by geothermal drilling would become
insignificant. A different technique was used in St. Gallen, but that
promise turned out to be false.

“Deep heat mining plays a significant role in Switzerland’s energy
shift,” Elmar Grosse Ruse, project manager for climate and energy at the
World Wildlife Fund (WWF), told IPS. Along with all other major environmental organisations, the WWF supports geothermal energy.

Ruse said that the future of the technology in Switzerland depends on whether and how the project in St. Gallen continues.

“The worst case would be if the project was aborted or if no adequate
thermal water resources could be found,” he said. Drawing the curtain
over geothermal energy after a few unsuccessful efforts would be
premature, he said.

“Honestly, no drilling, not even in tunnel construction, is entirely
without risks. If we as a society decide to pull out of much riskier
technologies such as nuclear power and to drastically reduce our CO2
emissions, we have to accept the minor risks of alternative
technologies,” the WWF project manager said.

Meanwhile, Peter Meier’s Geo-Energie Suisse AG is searching for
locations for petrothermal power stations. “We have learned from Basel,”
he told IPS. Geo-Energie Suisse has always said that with drilling
seismic activity may occur. “Our advanced technology leads to reduced
seismic activity though, as our drilling technique disperses the
pressure on many, already existing fissures in the rock.”

Technically, the incident in St. Gallen will not affect Meier’s
projects. “We use a different method in a different rock.” Unlike in St.
Gallen, most Swiss geothermal projects target crystalline rock.

Nevertheless, Meier is aware that in the near future, he’ll have to do a lot of additional persuading.
WWF’s Grosse Ruse said that it might be better to plan geothermal
power stations further away from densely populated areas. The dilemma
however is, that waste heat users may then be too far away.

“Heat can be easily transported, hence that’s not a decisive factor,”
countered Meier. His company nonetheless targets such less populated
areas, but for other reasons. The CEO stressed that it isn’t about using
nearby inhabitants as guinea pigs, but points at another factor:
“Insuring potential damages in cities would be way more expensive.”